SEC’s Gensler warns House bill could put investors at risk
SEC Chairman Gary Gensler expressed concerns about the 21st Century Financial Innovation and Technology Act (FIT21); It’s a House bill that he believes would significantly weaken the U.S. Securities and Exchange Commission’s (SEC) ability to oversee the cryptocurrency market.
The FIT21 Act, enacted by the House Agriculture Committee and the House Financial Services Committee, has the following objectives: Clarifies the roles of the SEC and the Commodity Futures Trading Commission (CFTC) in regulating cryptocurrencies.
The bill introduces a new term, ‘digital product’. In the case of digital assets that do not qualify as securities, This places these assets under the jurisdiction of the CFTC.
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Gensler says FIT21 is It creates regulatory gaps and undermines long-standing precedent for the management of investment contracts. It puts investors and the capital market at risk.
One of Gensler’s main concerns is The bill excludes investment contracts recorded on blockchain from the definition of securities. It thus eliminates federal securities law protections.
Even the bill Allow companies to self-certify We only offer digital products to SEC. It will take 60 days to assess whether these assets meet the new definition. Gensler argues: there is not enough time This is because the amount of digital assets in circulation is large.
Besides, he Criticized the bill for ignoring the Howey Test. The following Supreme Court precedents have been used to determine whether assets qualify as securities based on economic realities:
Instead, Billers makes decisions based on the labels and accounting ledgers used to record transactions. This is similar to determining the level of investor protection based on whether transactions are recorded on a laptop or in a software database.
Gensler warned the bill could increase. Prevents risks to U.S. investors by weakening investor protections and excluding exchanges from necessary oversight. He also warned that FIT21 could harm broader U.S. capital markets by allowing companies to avoid SEC oversight through a decentralized network.
The House of Representatives The FIT21 bill is scheduled to be voted on on May 22. However, this bill faces difficulties in the Senate, so it is unlikely to pass this year.
Nonetheless, the controversy highlights tensions between regulators and the cryptocurrency industry. Because both sides are struggling to find a balance between oversight and support for innovation.
The SEC is known for its strict cryptocurrency regulations and ongoing legal battles with cryptocurrency companies. Recent cases include Uniswap Labs, which received a Wells notice from the SEC and formally disputed the regulator’s claims.
With a master’s degree in Economics, Politics, and Culture in East Asia, Aaron wrote a scientific thesis analyzing the differences between Western capitalism and collective capitalism after World War II.
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